TMI Blog2015 (5) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... m. In these circumstances, we are left with no alternative, but to sustain the orders of the revenue authorities & consequentially reject the ground as raised by the assessee.- Decided against assessee. Disallowance of holding expense - reimbursement made to its C & F agents at Delhi, Gujarat & Kolkat - Held that:- The expense could not be held to be capital in nature, as no enduring benefit could be attained. We therefore, accept that the expense shall be revenue in nature. - Decided in favour of assessee. GP addition - Held that:- As being produced now before us, pertaining to the disallowance, we are of the opinion that this issue of sale of scrap of ₹ 11,76,000/- be restored to the file of the AO. We therefore, set aside the order of the CIT(A) on this issue and restore this issue to the file of the AO for reconsideration - Decided in favour of assessee for statistical purposes - ITA No. : 2238/Mum/2013 - - - Dated:- 4-3-2015 - Shri B R Baskaran And Shri Vivek Varma JJ. For the Appellant : Shri Haresh G Buch For the Respondent : Shri Pavan Kumar Beerla ORDER Per Vivek Varma, JM: The appeal is filed by the assessee against the order of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,71,56,104/- incurred on neon sign boards and hoardings as capital expenditure and adding it back to the taxable income of the Appellant on the ground that they had the capacity to give advertisement for more than a period of 2-3 years. 2. He failed to appreciate the fact that the said payments were not for acquisition of any capital asset and that it would not amount to an acquisition of an advantage of an enduring nature. 3. The Appellant therefore prays that the said amount of ₹ 1,71,56,104/- be allowed as business expenditure. WITHOUT PREJUDICE TO GROUND IV V GROUND VI 1. On the facts and circumstances of the case and in law the CIT(A) erred in not allowing depreciation u/s. 32(1) of the Act on the alleged capital expenditure of ₹ 1,71,56,104/-. 2. He failed to appreciate and ought to have held that Depreciation on the capitalized portion of the advertisement expenditure was allowable u/s 32(1) of the Act. 3. The Appellant prays that the A.O. be directed to allow depreciation on ₹ 1,71,56,104/-. GROUND VII 1. The CIT(A) erred in confirming the action of the AG in considering the entire stock of goods worth ₹ 11,76,000/- as sold b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquiring the same had to be brought on record, which the AR submitted that the assessee is unable to so. 9. In such a case, when we do not find anything on record, as a proof of acquisition of the furniture and fixtures, we cannot even direct the AO to allow depreciation thereon, as we cannot make any observation with regard to the ownership of the asset, having been brought into existence and used for the purposes of business. 10. We, therefore, sustain the orders of the revenue authorities to disallow the expense claimed by the assessee. 11. Ground no. II is therefore, allowed. 12. Ground no. III pertains to amounts written off, which have been held to be capital in nature and therefore disallowed and sustained by the CIT(A). 13. The AR submitted before us that no details can be provided even today with regard to amounts written off. 14. The DR submitted that there was no infirmity in the order of the revenue authorities. 15. On going through the submissions, we appreciate that the AR accepted that no details could be placed before revenue authorities and no details can be placed now before us to justify its claim. In these circumstances, we are left with n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed reliance on the decision of ITO vs. Spice Communications Ltd. reported in 35 SOT 78, wherein, the coordinate Bench of the ITAT, Delhi held, dispute that the assessee was in the business of providing cellular mobile services under its own selfgenerated brand Spice since 1997. The assessee s business was undoubtedly highly competitive and it had to provide services in a competitive environment. This was also not in dispute that the assessee had incurred expenditures towards advertisement and sales promotion in the course of carrying on its business activities. The Assessing Officer had allowed 90 per cent of the expenses as revenue expenditure and allocated 10 per cent towards capital by observing that 10 per cent of expenses had been incurred towards brand building. The Assessing Officer had not been able to justify as to how the 10 per cent of the total advertisement and sales promotion expenses could be allocated towards capital expenditure when the assessee had not acquired any brand from any outside party. The expenditures on advertisement and sales promotion constituted expenditures incurred on press advertisement, hoardings, neon sign brochures etc. The press a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany cannot be allowed to change the accounting treatment of particular item without any basis 8. Thus, only on the ground that the frames of these glow sign boards are made of steel/aluminum, the Assessing Officer came to the conclusion that the expenditure incurred thereupon was capital in nature. He was also influenced by the fact that till the previous year, the assessee had itself apita1ized the expenditure and only from the assessment year 2005-06, accounting policy in regard to incurring on expenditure on glow sing boards was changed by the assessee. 9. The CIT(A) deleted this addition holding it to be expenditure of revenue in nature. 10. The order of the CIT(A) has been upheld by the Tribunal and in arriving at the conclusion that the expenditure was of revenue nature, the Tribunal has followed the judgment of the Punjab and Haryana High Court in the case of CIT v. Liberty Group Marketing Division [2009] 315 ITR 125 /[2008] 173 Taxman 439 We have gone through the said judgment rendered by the Punjab and Haryana High Court. The Court dealt with the same issue, viz., expenditure on glow sign boards and held the expenditure to be revenue in nature in the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I becomes infructuous. 31. Ground No. IV V are allowed ground no. VI becomes academic. 32. Grounds no. VII VIII pertain to addition of ₹ 11,76,000/- plus GP @ 56%, and coming to ₹ 18,34,560/-. 33. The AR submitted no details could be submitted before the revenue authorities, but has now submitted details, which would prove that the assessee sold the make-up materials and other materials as scrap. The AR submitted, that the assessee be allowed to prove the claim. 34. The DR supported the orders of the revenue authorities. 35. After considering the facts and the evidence, as being produced now before us, pertaining to the disallowance, we are of the opinion that this issue of sale of scrap of ₹ 11,76,000/- be restored to the file of the AO. 36. We therefore, set aside the order of the CIT(A) on this issue and restore this issue to the file of the AO for reconsideration, needless to mention that adequate and reasonable opportunity shall be provided by the AO to the assessee to present its case. 37. Grounds no. VII VIII are therefore, allowed for statistical purposes. 38. In the result, the appeal as filed is treated as partly allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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